During the first nine months of the current financial year, the Indian government’s fiscal deficit amounted to ₹9.82 trillion, which is 55% of the annual estimate of ₹17.87 trillion, as per data from the Controller General of Accounts released on Wednesday.
In the corresponding period of the previous year, the fiscal deficit was ₹9.93 trillion, representing 59.8% of the annual estimate of ₹16.61 trillion for FY23. The decrease in the fiscal deficit, despite increased government spending to stimulate economic growth, was attributed to higher tax receipts and a rise in non-tax revenue.
The government aims to bring down the fiscal deficit— the gap between government income and expenditure—to 5.9% of the gross domestic product (GDP) in FY24, compared to 6.4% in the previous fiscal year.
There is a commitment to further reduce the fiscal deficit to 4.5% of GDP by FY26. A higher fiscal deficit can lead to increased debt burden and more spending on debt servicing, potentially impacting the economy and risking currency devaluation, as well as affecting private investments.
Capital expenditure rose to ₹6.74 trillion during April-December FY24, accounting for 67.3% of the annual estimate, compared to ₹4.90 trillion in the same period in FY23. Total receipts during this period reached ₹20.72 trillion, representing 76.3% of the annual estimate, with tax receipts at ₹17.30 trillion (74.2% of the annual estimate) and non-tax revenue at ₹3.12 trillion (103.5% of the annual estimate). Total expenditure increased to ₹30.54 trillion, or 67.8% of the annual estimate, up from ₹28.18 trillion in the corresponding period in FY23.
While the government has expanded the coverage and extended tenures of key welfare programs ahead of the upcoming general election, experts anticipate a slight overshooting of spending targets for the fiscal year. However, the government is expected to maintain its fiscal deficit target, thanks to higher-than-expected tax and non-tax revenues.
Rating agency Icra suggests that revenue expenditure may marginally surpass the budgeted target due to factors like major subsidies and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). Icra projects a marginal exceeding of the FY2024 budget estimate by around ₹50 billion (or ₹5,000 crore).
Despite challenges in meeting divestment targets, the government anticipates that higher non-tax revenue, including dividends from the Reserve Bank of India and state-run banks, will offset any revenue shortfall and enable it to meet its fiscal deficit target for FY24.
